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Monday, 29 February 2016
Page: 1262


Senator LINES (Western Australia) (12:35): I too rise to speak in support of the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016. The bill amends the capital gains tax rules applying to small businesses that transfer assets as part of a genuine restructure. This measure was announced as part of the government's Jobs and Small Business package in the 2015 budget and will have effect for asset transfers taking place after 1 July 2016.

Businesses with revenue below $2 million will be able to defer gains or losses that would otherwise be made as a result of transferring business assets from one type of entity to another. Amending the Income Tax Assessment Act 1997 will provide greater flexibility for small businesses when changing their legal structure. The amendments allow deferral of gains or losses that would otherwise be incurred when a business's assets are transferred from one type of entity to another. The current laws create an obstacle to small businesses restructuring, because they may incur a significant tax liability in the process. This is important because, under the current rules, a small business looking to incorporate, or a company which wants to become a trust, will incur a capital gains tax bill for simply transferring assets from one business structure to another business structure. This new small business rollover would be additional to the rollovers currently available where an individual, trustee or partner transfers assets to a company in the course of incorporating their business.

Labor understand that small business is a key driver of new jobs, and we understand the role that small business has in making Australia's economy much stronger. That is why we support this measure. It will make it easier for small business to change their structure, as their needs and activities change, without incurring big tax bills. Without this sort of change we might see that businesses do not take that step because of the risk of incurring additional costs.

We also know that small businesses make up the heart of the Australian economy; there are around two million small businesses in Australia employing almost five million people. Labor want to see small businesses treated fairly and to give them the opportunities and abilities, through these sorts of changes, to make their businesses work, because that paves the way for a $340 billion contribution to Australia's economy.

Labor supports small businesses. We support the removal of impediments to genuine business restructuring. Labor wants small businesses to have the flexibility they need to grow and thrive. In many rural and regional country towns across the country small businesses are at the centre of ensuring that those communities remain viable. Labor wants to see new businesses established. But there is a big financial risk when individuals or families make the decision to establish a new business or expand an existing business.

As with any tax change, it is important to ensure that the change works as intended. That is why Labor has proposed that Treasury review the change after two years of operation. We want to signal to small business that there is certainty in this new change. We also want small business to have certainty in knowing that if it is not working, or if it requires tweaking, there will be a review in two years and that they will not have to lobby or spend their time talking to politicians and lobbying government bureaucracies instead of looking after their businesses.

A review for a change of this sort is required. We do not want to see this useful rollover measure become another loophole for tax dodging. We do not want to see some smart accountant find those loopholes and exploit them, because that is not what is intended by Labor's support for this move. We support the move for genuine reasons. We want to genuinely enable proper businesses—legitimate businesses—in Australia to prosper and grow. We do not want to sponsor anything other than that, which is why that review period is critical.

We know from reports in the media and through the sorts of inquiries we have seen in the Senate that there are currently way too many tax loopholes, particularly in relation to multinational corporations—which are certainly not paying their fair share of tax—with report after report of corporations paying zero tax. The bill sets out a genuine restructuring principle which is designed to separate legitimate business restructures from artificial tax avoidance schemes.

What we have seen in the media is company after company using some currently available loophole to avoid paying tax—never mind them paying their fair share of tax; they are paying zero tax. That is not what Labor is supporting in this move. We want to ensure that a restructure will be considered to meet this principle when, for example, the business continues to operate following the transfer under a different structure but with the same ownership; when the transferred assets continue to be used in the business; and when the transfer does not represent a divestment or a preliminary step towards facilitating the realisation of the value of the assets. Further, to be eligible for the rollover, both the transferor and the transferee of assets must be residents of Australia for tax purposes.

We think that the checks and balances are there in this bill, but the proof will be in the pudding. That is why it is critical that we have a review after two years. If things are going well, business is happy and there has been no rorting through unintended consequences, then that is fine. But review periods are there to make sure that new laws are working as they should—and that is certainly what Labor want to ensure with our support for this bill.

The government's interest in small business is brand new. What we have seen over the past two years is a government that has largely been missing in action when it comes to small business. First, they scrapped Labor's permanent instant asset write-off, only to bring back a temporary version as a sugar-hit for consumption. They also wound back Labor's loss carry-back measures which did so much to help small businesses with their cash flows. That was one of the policy areas that small business welcomed when Labor was in government.

If the government really wants to support small business, they must not go ahead with Mr Morrison's plan for a 15 per cent GST. We have heard Mr Turnbull be a little firmer in saying that it is off the table, but there is such chaos and differences of opinion within the government that you can never be sure. But if you make basic items more expensive for Australian families they will buy less of everything—that is the economics of that—and that would mean far less spending at small businesses across the country. Certainly when the Liberals first introduced the GST some 15 years ago, ABS data tells us the economy shrank in the six months that immediately followed. This mirrors the experience of countries like Japan, which saw its fragile economy slip into recession after raising its consumption tax in 2014.

Labor stand on the side of Australia's small businesses and oppose any increase to the GST. We oppose any moves that are counterproductive for small business. But Labor's backing for this bill comes in tandem with our own strong suite of policies to support small businesses and start-ups. These include our plans to offer a start-up year at university to young Australians looking to start their own enterprises, backing in great ideas through co-investing in early stage and high potential companies through a $500 million smart investment fund and improving access to finance for microbusinesses through a partial guarantee fund.

But Labor, in supporting the bill, recognise that it is modest reform. Obviously we support it, but it is modest reform. Unfortunately, as the government is in chaos, it does not form part of an overall tax package. It is not part of a comprehensive review or a comprehensive overhaul of the current system. It is tinkering at the edges. Fortunately for small business it is a good move, but in terms of a full tax review this is an amendment on its own, out there floating in the void, floating in the ether of the Turnbull government's 'no coherent tax plan'.

Australian voters could be forgiven for thinking that the Turnbull government backbench and the media are running the show; the 44 who did not vote in Mr Turnbull as Prime Minister. The number of backflips and flip-flops from the current Prime Minister surely sets a new record? The old Prime Minister, Mr Abbott: his legacy of broken promises certainly set a record; on and on they went. Those broken promises on his commitments—no cuts to health, no cuts to education, no cuts to the SBS, not cuts to the ABC just to name a few—defined the Abbott government, and the current backflips and flip-flops will define the current Prime Minister and, indeed, the Turnbull government. We have seen backflipping and flip-flopping on the GST, on tax on superannuation and on capital gains tax, and last week what a debacle in the House on negative gearing. They could not even get their ministers on the same page. Allegedly, Labor's policy is going to increase housing and it is going to decrease housing—they are not sure. And today we hear on the news that the backbench again is advising Mr Turnbull on tax policy, particularly in relation to negative gearing. Apparently, according to the backbench, there will be none.

If you follow the Turnbull government you would be more inclined to believe what the backbench say than what either the Prime Minister or his ministers say, because it seems that when the backbench speak, because what they say eventually trickles down and becomes policy of the Turnbull government. We saw that with the GST, where the backbench were in complete revolt around that and so eventually we saw it absolutely—we think; who knows—potentially ruled out by the Prime Minister. And we note that like his predecessor, Mr Hockey, Mr Morrison is now in witness protection, as he should be after that appalling National Press Club speech. He was a Treasurer who really had nothing to say about tax reform or the budget.

On all of those points—the GST, tax on the wealthy and their superannuation, on capital gains tax, on negative gearing—Mr Turnbull, before he became Prime Minister, held the completely opposite view to the one he holds today. Backflipping, flip-flopping: that is what we have seen from Mr Turnbull. He said one thing a year or two ago, just like with marriage equality. Apparently he is a supporter, and yet we are going down this expensive, unnecessary plebiscite, which is going to cost at least $160 million, when his own backbench are out there saying, 'We don't really care if the plebiscite says, "Let's introduce marriage equality", because we're not going to support it.' Again, we have seen the backbench ruling the day. They have made it very clear to Mr Turnbull what their view is.

Obviously the views that Mr Turnbull now holds on those matters of tax are the views of the ultraconservative Tea Party backbench of the government. The only agility we have seen from the Turnbull government, in fact the only agility we have seen from the Prime Minister, is his ability to do backflips and flip-flops. Seriously, he could win a gold medal at the upcoming Olympic Games for the number of backflips and flip-flops that he has entertained Australian voters with. If only it were not so serious; if only the consequences did not then impact on ordinary people and on ordinary families' abilities.

Why would Australian voters trust the Prime Minister to deliver on fair tax reform when we look at Mr Turnbull's record, particularly in relation to the National Broadband Network? Small business of course rely on the NBN. As well as providing a fair framework and a framework on which they can operate and move, they also need to communicate. Certainly we have heard the stories of people in rural and remote Australia, who the Nationals have completely deserted, who have to move into town. They cannot run their businesses from their stations because their current internet service is so slow that they just cannot meet the grade. We have seen no support there.

But let us have a look at Mr Turnbull's record, because people like to stand on their record. I am sure Mr Turnbull does not want to stand on his record as the communications minister because, quite frankly, it is a mess. Despite his backflipping and flip-flopping, there is no way he can move away from taking full responsibility for what is happening with the National Broadband Network across this country. He was given a very important job, a big job, of continuing to roll out Labor's innovative NBN. He has well and truly messed it up. It is on the public record—it is a mess-up. According to a leaked confidential report—another one—which is there for all to see in an article by Mark Kenny in this morning's The Sydney Morning Herald, there is 'a litany of problems'. This is the record of the Prime Minister when he was Minister for Communications on the NBN: 'a litany of problems'. This report relates to the NBN that Mr Turnbull has overseen in his former role as Minister for Communications. The report goes on to say that the NBN 'is facing mounting delays and rising costs'.

No matter how those opposite try to dress it up, they have made one almighty mess of the NBN, and there is only one person responsible for that: the current Prime Minister, Mr Turnbull. He had one job to do: to deliver the NBN in a cost-effective way. We have seen a second-rate system being rolled out. We have seen now, according to this confidential leaked report—obviously someone wants the truth out there—that it is facing mounting delays, as all Australians know, and rising costs.

Now Mr Turnbull, the Prime Minister, the failed communications minister—good heavens, he is running the country! He could not run the NBN and now he is running the country. Is it any wonder that he has been unable to deliver a coherent tax plan or tax policy, a fair policy which ensures that big companies in this country go from paying zero tax to paying their fair share? We have seen in the past the ad hoc way in which Turnbull government has dealt with policy in and around taxation. We saw the dirty deal that the Greens did with the government on part pensions, which is going to put a serious burden on our ability to fund pensions into the future, because more Australians, through the Greens deal with the government, will need the age pension as they retire, thanks to that absolutely short-sighted deal that they did. I said last week and I say it again: the Greens have got their L-plates on and the government has its P-plates on. When you put those together you end up with an absolute mess. We have seen the deal that was done last week which will disenfranchise millions of Australians and potentially give the government control of the Senate. Heaven help us on tax policy then.